FISHERIES COST RECOVERY STANDING COMMITTEE

CHAIRS SUMMARY - Meeting #29

Introduction

The purpose of Fisheries Cost Recovery Standing Committee (FCRSC) Meeting #29 was to continue to work on the design of a new prospective cost recovery system to be implemented by 1 April 2014, as previously instructed by the Minister for Agriculture and Food Security at meeting #25.

At FCRSC #28, I agreed to inform the Minister of a number of reservations held by industry on the proposed new system, specifically the timetable for implementation, broader consultation with industry, and the difference of opinion between DPI and the abalone industry regarding the delivery of services up to 7.2% of GVP. The Minister determined that the best way to address these matters was to speak directly with the Committee's industry representatives by attending FCRSC meeting #29.

The meeting focussed on:

• The guidance provided by the Minister for Agriculture and Food Security
• Action items from Meeting #28, the abalone cost recovery workshop and the non-abalone cost recovery workshop
• Deliverables/Milestones described for each fishery
• Transition to the implementation of the prospective system/implementation
• Other issues

The Minister for Agriculture and Food Security

The Minister advised the FCRSC that the State budget is tight, and not to expect further government funding. The current level of service will be the maximum level of service to be expected and there will be no subsidization from the public purse for additional services. He indicated that Government is looking to implement more cost effective services.

The Minister stated that DPI is currently under-recovering costs incurred and there is a need to resolve issues in the operation of the system that have persisted since 2007/08.

It is not an option for the abalone industry to have an expectation that services up to the limit of 7.2% of GVP will, or can be delivered. This level of expenditure on services is not guaranteed by the regulatory (royalty) framework since levies go to consolidated funds and there is no further money available for to support additional services beyond those allowed for in the current budget.

The changes being discussed need to begin to be implemented in 2014-15. A 12 month extension has already been provided and there is to be no extension of time from 1 April 2014 as requested by industry. The Minister advised the FCRSC that he is agreeable to the phasing in of the new approach over three years, with the system to be fully operational at the start of the third year. He is also prepared to have an additional trial year as requested by industry (i.e. 1 year trial + 1 year trial + then set for 4 years).

The Minister expects the Department and industry to work together to find smarter ways of providing the services that are needed. The challenge is to deliver services more cost effectively and considering how best to involve industry with the right checks and balances.

The Minister suggested for smaller fisheries there may be some scope for reductions in compliance services but there would need to be a corresponding increase in the level of penalties for non-compliance.

The Minister confirmed that the Regulatory Impact Statement (RIS) consultation will be an 'open' process. The systems and process that will be contained in the RIS are subject to review and revision of draft regulations as necessary, and there will be opportunity for broad and meaningful consultation on a range of issues within each industry sector.

Follow up discussion

Following the departure of the Minister to attend to other matters, the FCRSC agreed to have a detailed discussion regarding the advice/instructions outlined by the Minister.

The FCRSC noted that DPI and the abalone industry need to work together to confirm the current level of cost recoverable services provided as set out in the schedules.

The FCRSC referred to cost recovery principle number 5... 'operation of the system should promote opportunities for efficiency improvements'. Industry asked what would happen if an alternative service provider could be proven to deliver a particular service at a lower cost than DPI could deliver that service? DPI acknowledged that benchmarking was an appropriate approach to assess the efficiency of service provision. Consideration could also be given to external provision of some types of services (excluding services that can only be delivered by Government) where standards and specifications could be developed, and monitoring, where necessary, was practical to ensure integrity of provision. The costs of some of these processes (development of standards and specifications, monitoring, contract management) would themselves be recoverable.

Industry considered that the schedules of services do not contain sufficient detail to allow for contestability, i.e. an alternative service provider could not accurately quote for the provision of a service without precise specification of services to be provided. DPI agreed that more detailed standards and specifications would need to be developed in instances where services could be put out for public tender. It would simply be too time consuming to create a service specification for every cost recoverable service within each of the 42 fisheries, and would be inconsistent with cost recovery principle number 2...'The cost recovery system should be administratively simple and minimise operating costs'. DPI has created the schedules, in consultation with the FCRSC, to specify the cost recoverable service to be delivered, including a definition of the service, the milestones against which performance can be measured, and the time and cost incurred by DPI to deliver that service on behalf of industry; further detail would be required for outsourcing.

Industry sought clarification from DPI that it is prepared to enter into discussion on a sector-by-sector basis to discuss cost recoverable services for each fishery considering the risks and statutory obligations related to a fishery. DPI advised the FCRSC that it was prepared to do this, and in fact had already been doing this via the two cost recovery workshops and on-going discussions with the industry expanded FCRSC.

DPI confirmed it is their the intention to use a risk-based forward budgeting approach to fisheries management , i.e. balancing the risk, levels of catch and other regulation, and management costs, combined with the aim of minimising the need for regulation.

Following industry feedback regarding the proposed level of increases to levies across a number of fisheries, DPI tabled a paper that outlined a number of proposals/concessions to mitigate economic impacts on industry with a particular focus on impact of smaller businesses. The Department provided advice that the Minister had approved consideration of these options by FCRSC.

DPI advised the FCRSC that the quantum contained in each mitigation proposal was Committee-in-Confidence at this stage. The Committee discussed the rationale for each proposal noting the need to ensure that the rationales, wherever possible should be designed to secure the support of the Victorian Competition and Efficiency Commission. DPI sought feedback from industry members/advisors on each of the proposals.

The FCRSC considered the pros and cons of each of the proposed concessions. The FCRSC noted the impact of the proposed concessions on the estimated amount to be recovered under the new cost recovery system.

On 16 November 2002, National Parks (Marine National Parks and Marine Sanctuaries) Act 2002 came into effect. The Committee again noted that the (then) $3.4 million of FMS provided through the Marine Parks and Sanctuaries (MPS) initiative will continue to be exempt from cost recovery, subject to the Government continuing to provide this initiative funding.

Industry pointed out that following the concessions, there would still be a significant increase in the total amount of levies to be collected from industry on 1 April 2014. The FCRSC recalled the advice reflected in the Chair's opening statement at FCRSC #25 that the Minister does not require advice from the FCRSC on the matter of 2012/13 levies. The issue of increasing the level of recovery by rolling over by the Consumer Price Index, or applying some other level of increase, will be resolved following consultation between the Government and SIV. The FCRSC suggested SIV should seek a response on proposals for levies for 2013/14. Depending on the level of levies set for 1 April 2013, the increase for the 2014/15 licensing year (1 April 2014) may not be as large as that being discussed by the Committee.

Actions items from Meeting #28, the abalone cost recovery workshop and the non-abalone cost recovery workshop

The Committee noted that the Department had actioned 21 items from the previous meeting and two workshops. Industry members of the FCRSC congratulated the Department on the work that they have been doing, under considerable time pressures, relating to the introduction of this new prospective cost recovery system. Ongoing items to be actioned include investigating the possibility of implementing prior reporting in applicable fisheries to reduce compliance costs and efforts to increase aquaculture representation on FCRSC.

Deliverables/Milestones for each fishery

The FCRSC noted the schedules had been amended following industry feedback previously provided. In a number of instances, the level of service, and by extension, the cost of delivering those services had decreased, whilst the level of services in some other fisheries had been increased.

The FCRSC discussed the introduction of a time recording system. One industry advisor was of the strong opinion that a time recording system is required to 'prove' to industry that the effort indicated by DPI in the schedules for each fishery is accurate. The FCRSC noted the residual concerns from the past performance of the fisheries cost recovery process and the impact this places on trust between DPI and industry. Noting the considerable expense involved, Mr Hurst agreed to consider implementing a time recording system for a 12 month period to re-assure industry about the level of cost recoverable services that are provided. Industry then suggested that if DPI is going to implement a time recording system, it should be permanent, not just for one year. The majority of the FCRSC expressed real reservations about the usefulness and cost of developing and implementing a long-term time recording system that would be linked to DPI's Project Costing Model, finance and budget systems, the initial cost of which is estimated to be $350,000. This amount would then be recovered from industry. After some discussion, the majority of the Committee agreed that the option of a long-term time recording system was inappropriate.

In noting the need for transparency about the delivery of cost recovered services, the FCRSC also acknowledged the need for practicality and simplicity. The Committee recognised that it would be the deliverables and milestones that should be the focus in assessing the performance of the new cost recovery system, rather than the precise hours or dollars expended, which would be costly to track. The Committee reiterated the conclusion reached at meeting #26 that reporting at the fishery level should support transparency and accountability. The Committee noted that once the prospective cost recovery system was implemented, it would be a key role of the FCRSC to critically review these fishery-level reports on a regular basis.

The FCRSC again noted that the schedules do not address resource-sharing arrangements in fisheries. They set out the best estimate of recreational versus commercial catch for use when attributing costs on the basis of take for some management and science services.

The FCRSC also noted that the schedules may need to be further amended following a) the abalone sector's desire to review the agreed current level of services in view of the Minister's advice, and b) the proposals that DPI tabled which FCRSC support.

Transition to prospective system/implementation

The FCRSC noted the Minister's advice that cost recovery will be phased in over a three year period. This will ease the initial impact on licence holders and provide opportunities for further consideration of necessary services and technology that could continue to improve efficiency. Industry expressed a preference for 'end loading' the increases in costs to reduce the cost burden while more efficient means of delivering services were being developed.

The FCRSC noted that the phase in would be from 1 April 2014 (i.e. the first trial year of the new prospective cost recovery system).

The FCRSC discussed a range of phase-in approaches that could be implemented.

Next meeting:

Friday 8 February 2013.
Meeting closed at: 4:00pm